Today we shall take a look at the USD/JPY pair. After reaching its highest level in one year last week, the pair failed to over the 111 level and bounced back down, though this could be just a short-term consolidation before another bullish push.
At present, there is not much that could help strengthen the Japanese yen. The economy of Japan has been in a recession long before the coronavirus pandemic began, and the Covid-19-related issues in global trade and low inflation rates have affected Japan, making the situation a little bit worse. The Bank of Japan recently announced that it will also ease out of its massive bond purchasing program, after not finding the results it was looking for during the many years of fiscal stimulus. The yen can only gain if safe haven assets are in demand, but considering the fast improvements in the United States, that scenario is not very likely. Thus, the yen has the potential to lose more ground, perhaps as far as the 2015 maximum of 125, at least in the long term.
As for the US dollar, it is well supported by multiple factors, which together award it the place of the most trustworthy and reliable currency in the world. Despite a slight surge in infections in the United States, Biden’s administration seems to have a solid plan to keep the pandemic at bay, with vaccinations continuing at an unprecedented rate. States are making good use of the Covid-19 relief package that Biden secured to tackle the pandemic. Furthermore, Biden is now also trying to gather support for yet another massive stimulus bill, the American Jobs Plan, which could boost GDP growth by 1% if implemented. Economic fundamentals from the United States have been good, indicating that even the Federal Reserve might have to reconsider a more hawkish stance if the reports keep outperforming the forecasts.
In terms of the daily chart, we have a pivot point for the pair located at 110.29, with the pair trading above it currently. The support levels lie at 109.83 and 109.50, while the resistances are located at 110.62 and 111.08. The indicators of technical analysis agree in strongly recommending a buy position today.
